2015 (2) TMI 188 - HC - VAT and Sales Tax

Waiver of pre deposit - Levy of tax on bitumen imported - whether bitumen imported into local area for use in BOT (built, operate and transfer) project is taxable under the Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002 - Held that - Petitioners in the six petitions have already deposited an amount of ₹ 1.60 crores in the aggregate out of the total tax liability of ₹ 14.99 crores (excluding the penalty amount). We find that the Tribunal has while directing the petitioner to deposit 30 per cent of the amounts due has not excluded the penalty amount. In cases where the issue is debatable and warrants a stay, then in such cases normally the penalty amount should not be taken into account for the purposes of deciding the amounts to be deposited. In case while granting stay of the order appealed against the appellate authority is of the view that some amount of penalty should also be deposited, then the order directing deposit must indicate strong reasons prima facie warranting the deposit of penalty at the stage of stay application. Moreover in this case, the Tribunal has not considered the issue of financial hardship pleaded by the petitioner before directing a deposit of 30 per cent of the amount due for staying the order appealed against before the Tribunal. According to us, both these issues are germane to decide the quantum of deposit required to be made by the petitioner for grant of stay of the order impugned before the Tribunal. - Order of Tribunal set aside - Matter remanded back - Decided in favour of assesse.

Summary

Issues:
Challenge to common order of Maharashtra State Sales Tax Tribunal granting stay of assessment orders and first appellate authority's order. Dispute on taxation of bitumen imported for BOT project under Entry Tax Act. Grievances regarding deposit amount, penalty imposition, and financial hardship consideration.

Analysis:

The petitioners challenged a common order of the Maharashtra State Sales Tax Tribunal granting stay on assessment orders and orders of the first appellate authority. The dispute revolved around the taxation of bitumen imported for a BOT project under the Entry Tax Act. The Revenue contended that bitumen was taxable, while the petitioners argued for exemption under section 3(5) of the Entry Tax Act, stating that bitumen was imported for resale. Additionally, the petitioners argued that bitumen emulsion, included in the tax levy, was distinct from bitumen and should not be taxed. They relied on a decision of the Madhya Pradesh High Court to support their claim.

The Tribunal directed the petitioners to deposit 30% of the total dues, including tax and penalties imposed by the assessing officer. The petitioners raised three grievances: Firstly, they argued that the issue was debatable as it was pending determination before the Commissioner of Sales Tax, and thus the deposit should not have been required. Secondly, they contended that in debatable cases, the penalty should be waived for granting a stay. Lastly, they claimed that the Tribunal did not consider their financial hardship, which could lead to business collapse if the deposit was made.

The Revenue supported the Tribunal's order, stating that it was passed solely for the stay application. The petitioners had already deposited a significant amount out of their total tax liability. The High Court noted that in cases where the issue was debatable, the penalty amount should not be considered for the deposit. The Tribunal had also failed to consider the issue of financial hardship before directing the deposit. Therefore, the High Court set aside the Tribunal's order and remitted all matters for fresh consideration, emphasizing the need to address the issues of penalty imposition and financial hardship while deciding on the deposit required for granting a stay.